Anyway, the point is that the US economy will not be able to sustain recovery for long without stimulus. The likely result of withdrawing stimulus is a recession that is deeper than the last one aka a major depression.

Deficits as far as the eye can see

But right now, a lot of talking heads are trying to bamboozle people with tales of woe about hyperinflation and sovereign bankruptcy in the US to support specific claims about what deficit spending can and can’t do. Deficit hawks, in particular, are on the warpath – a completely predictable outcome since I anticipated it just as Obama was elected in November 2008 (see Beware of deficit hawks).

Of course the US deficits are too large. Come on: 10% deficits as far as the eye can see are unsustainable over the long-term. The key word, however, is long-term. However, no one seems to understand the difference between short-term and long-term and the debate has become an ideological free-for-all.

Earlier this month, I told you I am throwing in the towel on policy makers because it’s clear that Obama has been captured by the deficit hawks and we are headed for a painful recession within the next two years (maybe even as soon as next year).

The policy debates aren’t working because the actual mechanics of a fiat monetary system are being obscured by ideological political debates. So, what I want to do is lay the foundations of modern money with you so we can strip away the politics and ideology from the economics.

The goal is to demonstrate that fiscal deficits and surpluses are endogenous to our economic system and depend on exogenous policy decisions which are inherently political and ideological.

Let me give you an example. What if we allowed the US economy to proceed without making one economic policy decision for the next two years? What would happen? The answer is that the government would have a fiscal deficit of X billions of dollars exactly matched by X billions of surpluses in the non-government sector (remember the sectors must balance). The deficit outcome is endogenous. It is a function of the inputs i.e. of the private sector’s desire to save and the government’s spending decisions.

On the other hand, government economic policy decisions are exogenous. They are input variables which alter outcomes. This is an important point because if we know how the monetary system works, then we can get a much better handle on how different policy decisions actually affect deficits and surpluses. And remember, policy decisions are almost entirely political. That is they are driven by ideological positions.

So, if I say to you that I am against government spending and it must be cut, this creates a specific outcome path. On the other hand, if I say I am pro-stimulus, this too creates a specific outcome.

Modern Money

Here’s how I am going to go about this one:

I went to a conference on Modern Monetary Theory (MMT) on Wednesday. Over the next few weeks, I will present some ideas from the Modern Money people (Randy Wray, Marshall Auerback, Bill Mitchell, etc). I’ll start the post titles with "MMT:…."

I will take a somewhat antagonistic approach because I think that’s probably going to the best way to introduce this to people who have a more libertarian bent like myself.

Now, my bio says:

From an ideological perspective, Edward calls himself a libertarian realist: a firm believer in the primacy of markets over a statist approach. but not in an ideological way. Often government intervention and oversight is not just wanted but warranted.

So, my goal in this is to separate the policy and the politics from the mechanics of how our fiat money system operates. That way it will be clear what is actually happening in our monetary system right now and what is pure political posturing. You will also then probably see a lot of congruence between how I see the economic mechanics and how Marshall sees them. The difference, of course, is ideology.

The way I intend to position this is that Modern Money Theory economists are really the True Modern Money Operations economists because they present the true mechanics of modern fiat money operation, which I will show you.

Now, policy decisions are largely political, exogenous decisions about which informed decision-makers can disagree. However, if we aren’t at least informed about the mechanics of how modern money works, it is very difficult to have an intelligent debate about deficits, Social Security, fiscal stimulus or anything else for that matter.

I know that I have learned a lot from what the likes of Randy Wray and Bill Mitchell have said (remember, I studied economics in a time heavily influenced by the prevailing economic orthodoxy). I don’t ‘buy into’ a lot of what they propose on policy, but on modern money they have it right.

The purpose is to present the underpinnings where we can all agree and separate it from the ideological piece. My ideological foil in this will be Marshall Auerback. Afterward, I hope we can have a framework from which to talk about the political piece.

I hope you enjoy the debate and a presentation of the ideas.

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Author: Edward HarrisonEdward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.

25 Comments

I am very much looking forward to your discussion. I, too, am of a libertarian bent, being very suspicious of the motives of the government. However, from what I have read about MMT from Bill Mitchell’s site and others, I think they are right about how the economy works — at least, they have resolved some nagging questions in my mind about the economy. My difference with MMT folks is 1) I think the notion of public purpose that many of them have is too broad (meaning, too many responsibilities of the government) and 2) I think it is somewhat naive to think that a government can ever act fully altruistically for the benefit of public purpose. Anyhow, I look forward to your point of view.

I think you are correct in your assessment. In the classroom, these policies can have a real impact on the economy. However the government can never act without regard to special interests. This is what turns a useful stimulus idea into wasteful spending.

What surprises me are the many smart people who continue to believe that government offers a real solution. They cloud their judgment by blaming the other side, when really there is a structural problem with large social democracies.

There are proposals one can adopt which ultimately can mitigate the malign
effects of crony capitalism. That’s why we propose the government Job
Guarantee program, which need not be a high bureaucracy affair.
THIS IS WHERE WE INTEGRATE JAMIE GALBRAITH’S PREDATOR STATE CRITIQUE: we
acknowledge sock puppet politicians do have this proclivity and we recognize
their proclivity toward wasteful spending and given goodies to their
campaign contributors, and we argue IF YOU WANT TO TAKE THIS POWER BACK AWAY
FROM THEM you must support a Job Guarantee like mechanism that automatically
adjusts to insure the private sector can actually realize its desired net
nominal savings position…in other words, our proposal frees the system from
political parasites while increasing the freedom of the private sector to
achieve its goals.
You’re deeply loved libertarian ideology is just a cover for the financial
sociopaths, who have managed to deregulate everything because an ideology
which stresses that government is the problem and the market is the
solution. Because is simply serves the interests of sociopathic Wall Street
speculators to loot their pockets and for transnational firms to accelerate the
race to the bottom. What surprises me is that so many allegedly smart
people actually believe that this doesn’t occur. “Free markets” is a cloaking
device to provide cover for corporate predation. Deregulation often means
preventing government from exercising its power to prevent this occurrence.

A few reactions:
1. I’m actually very interested in the job guarantee proposal, so long as it remains voluntary for the participants and that there is some reward structure for doing good work (that’s actually very important for psychological well being).
2. I think there is a false dichotomy in your statements. For example, when I say I’m of libertarian bent, that does not mean that I am against all regulation (or that I support all deregulation). On the contrary, some regulation and rule of law is absolutely necessary in order to preserve liberty — in fact, I think that the protection of the citizenry from both one another and external threats is one of the primary responsibilities of governments. A big part of that protection is regulation against fraud, which has, unfortunately, been enabled and promoted by much of the deregulation efforts of the past couple decades or so. (As well as our government not doing it’s job at enforcing existing anti-fraud laws when it comes to the practices of certain banks and industries.) I know you were not directly responding to me in your statements, but I think we should be clear that being libertarian does not equate to being anarchist.
3. If I’m understanding MMT correctly (granted, a big “if”), it seems that the government controls the distribution of currency in the economy, based on what it chooses to apply spending. what I don’t yet see is how to prevent having that locus of control misused by politicians — that is, how to put a check and balance on the spending so that it is directed toward public purpose and not toward political abuse?

THERE IS A ‘RIGHT SIZE’ GOVT BASED ON PUBLIC PURPOSE OF THE PUBLIC SECTOR,
AND NOT REVENUES, THE FISCAL ADJUSTMENTS FALL ON THE TAX SIDE.
UNTIL THE OUTPUT GAP CLOSES, DEFICITS ARE SIMPLY OFFSETTING NON GOVT
‘SAVINGS DESIRES’ FOR DOLLAR FINANCIAL ASSETS.

THAT IS, DEFICITS ADD DIRECTLY TO NON GOV SAVINGS AND UNTIL THOSE SAVINGS
DESIRES ARE SATURATED GOVT ISN’T ‘FORCING’ FINANCIAL ASSETS INTO THE
ECONOMY.

On your point about the distribution of currency, that’s always a
government function. The monetary system, itself, was invented to mobilize
resources to serve what government perceived to be the public purpose. Of course,
it is only in a democracy that the public’s purpose and the government’s
purpose have much chance of alignment. In any case, the point is that we
cannot imagine a separation of the economic from the political—and any
attempt to separate money from politics is, itself, political. Adopting a gold
standard, or a foreign currency standard (“dollarization”), or a Friedmanian
money growth rule, or an inflation target is a political act that serves
the interests of some privileged group. There is no “natural” separation of
a government from its money. The gold standard was legislated, just as the
Federal Reserve Act of 1913 legislated the separation of Treasury and
Central Bank functions, and the Balanced Budget Act of 1987 legislated the ex
ante matching of federal government spending and revenue over a period
determined by the celestial movement of a heavenly object. Ditto the myth of the
supposed independence of the modern central bank—this is but a smokescreen
to protect policy-makers should they choose to operate monetary policy for
the benefit of Wall Street rather than in the public interest (a charge
often made and now with good reason).

So money was created to give government command over socially created
resources.

In a message dated 4/30/2010 21:07:09 Mountain Daylight Time,
writes:

Phil (unregistered) wrote, in response to Marshall Auerback:

A few reactions:
1. I’m actually very interested in the job guarantee proposal, so long as
it remains voluntary for the participants and that there is some reward
structure for doing good work (that’s actually very important for
psychological well being).
2. I think there is a false dichotomy in your statements. For example,
when I say I’m of libertarian bent, that does not mean that I am against all
regulation (or that I support all deregulation). On the contrary, some
regulation and rule of law is absolutely necessary in order to preserve liberty
— in fact, I think that the protection of the citizenry from both one
another and external threats is one of the primary responsibilities of
governments. A big part of that protection is regulation against fraud, which has,
unfortunately, been enabled and promoted by much of the deregulation
efforts of the past couple decades or so. (As well as our government not doing
it’s job at enforcing existing anti-fraud laws when it comes to the practices
of certain banks and industries.) I know you were not directly responding
to me in your statements, but I think we should be clear that being
libertarian does not equate to being anarchist.
3. If I’m understanding MMT correctly (granted, a big “if”), it seems that
the government controls the distribution of currency in the economy, based
on what it chooses to apply spending. what I don’t yet see is how to
prevent having that locus of control misused by politicians — that is, how to
put a check and balance on the spending so that it is directed toward public
purpose and not toward political abuse?

That’s the kind of ideological positioning which I am talking about. Reasonable people can argue about ‘short term’ turning into ‘long term’ but that is a political position and I am looking to separate that kind of posturing from the understanding the mechanics of fiat money.

Read my post on the Limitations of Government linked in the article and you will see me making these kinds of statements. But that’s not what this is about.

i got a novel idea. How about a mandatory budget! Let’s say make it the revenue plus x… but not one penny more. This idea that congress has power to spending and print money on demand is a joke. deficitaid.com is dedicated to finding solutions to reducing the blank check that our government seems to think it has forever. You can debate the economic principals with how governments monetize their economies with debt, but politicians have to have a ceiling to spending. Most of the biggest problems we face today has happened because of reckless deals made to unions, foreign governments, and big business. The deals could be promised because those in charge had a blank check book to make the deal. Take away that power, the government would slow become more responsible, efficient and productive. Today, this country can’t afford any more deals. We need constraints!

But the constraints don’t work. The experience of Europe demonstrates
that. Even under the gold standard, the “rules of the game” were persistently
flouted via bills of exchange. This is precisely Ed’s point. You can
mandate spending cuts, you can mandate tax rises, but you can’t control budget
deficits, which by their very nature are endogenous.
The shift to non-government surpluses has left a huge spending gap and
firms responded to the failing sales by cutting back production. Employment
falls and unemployment rises. Then investment growth declines because the
pessimism spreads. Before too long you have a recession. Without any
discretionary change in fiscal policy (now referred to in the public media as “
stimulus packages”) the government balance will head towards and typically into
deficit.
Why? As a result of the automatic stabilisers. Tax revenue collapses and
welfare payments increase – not in rates but in volumes as economic activity
wanes.
The greater the decline in non-government spending, the greater the rise in
the government deficit. The current situation has also been influenced by
the stimulus packages which have put a floor in the downward spiral and
saved the World from depression.
So the causality is from the non-government balance to the government
balance. This is another way of saying that the budget balance is endogenous and
driven largely by the spending and saving choices made by the
non-government sector. Private households and firms have it within their capacity to
drive the public deficit down whenever they choose. They can simply spend
more.
An attempt to achieve a discretionary reduction in the budget deficit –
via tax rate hikes or public spending cuts – will reduce aggregate demand
immediately.
This reduction in demand will reduce output and income. The only way this
will not cause a further contraction in the macroeconomy is if it stimulates
private investment and growth in the same outstrips the household saving
(so the private domestic sector goes into deficit); or households stop
saving and borrow more to spend up; or net exports grow to offset the reduction
in the deficit.
The first two possibilities are virtually impossible to imagine. Investment
falls when demand plunges and households save more. Credit becomes tighter
and so borrowing falls. Further, net exports might grow as imports fall
(due to the contraction in income) but it is very unlikely the required
demand offset would ever be forthcoming from this source.

This will be a great set of posts. I agree that the political corruption makes fiscal policy challenging. If we can temper our gut reaction to government spending in general and realize that government spending must increase to reflect increased material wealth (otherwise have deflationary effects – more stuff with less money to represents total value), as well as control aggregate demand, we will come a long way.

The current financial reform battle can be viewed as to who will have power to control the currency/monetary system – consolidated private financial interests or the public (albeit with more visible corruption)

And perhaps we can start focusing on government corruption and stop thinking that a corrupt beast can be starved instead of killed.

Forget the deficit implications for a moment. Let’s frame the real issue first:

It all depends on how you view the current crisis. Is this crisis an unavoidable self correcting process? Has anyone even bothered to ask if our economy (pre crisis) was a sustainable one? In my view there is something inherently wrong with an economy that needs such spectacular stimulus measures. The problem is, we don’t want to face that.

What we are witnessing is best summarized by Ludwig von Mises:

“There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved.”

I don’t agree that this is the correct way to frame the issue. The credit
is a function of bad fiscal policy, which forced greater resort to private
debt.
Most countries currently run external deficits. The crisis was marked by
households reducing consumption spending growth to try to manage their debt
exposure and private investment retreating. The consequence was a major
spending gap which pushed budgets into deficits via the automatic stabilisers.
The only way to get income growth going in this context and to allow the
private sector surpluses to build was to increase the deficits beyond the
impact of the automatic stabilisers. The reality is that this policy change
hasn’t delivered large enough budget deficits (even with external deficits
narrowing). The result has been large negative income adjustments which
brought the sectoral balances into equality at significantly lower levels of
economic activity.
But this framework while strict in accounting terms is open to
interpretation by policy makers. For example, you can sustain economic growth with a
private domestic surplus and government surplus if the external surplus is
large enough. So a growth strategy can still be consistent with a public
surplus. Clearly not every country can adopt this strategy given that the
external positions net out to zero themselves across all trading nations. So for
every external surplus recorded there has to be equal deficits spread
across other nations.

For once, households were doing the rational thing. Yes, the unintended macro consequences were severe – but that’s the point. The system was balancing itself. It was correcting itself form an era of extreme credit growth a severe one at that – one that exceeded productive growth. It *needed* rebalancing.

Yet what is the solution you propose? To fight this correction by continuing the system of illusory wealth creation via excess credit – credit above and beyond was is productively needed. As if *this time* the government will address the malinvestments of the past and finally get it right. It never does.

I’m not saying we step back and let the entire system collapse in a deflationary death spiral. I would rather we use increased gov’t debt to slow down the collapse – to manage it to a realistic level.

To fight this correction, as you suggest, will ultimately destroy the currency. Nothing personal – but I find the Keynesian and Monetarist theories to be arrogant in thinking they can coax and manipulate the economy as they see fit. In the short term, they succeed… but after several such doses of “economic stimulus,” the debt, if you haven’t noticed, never really gets repaid. It grows. The beast gets bigger and hungrier each time you witchdoctors of ecomomics feed it. It will turn on us all and destroy the currency.

Gold is patiently waiting in the wings. It has endured manipulation and ridicule for decades. Its time will come.

John Exter, von Mises, and others will be vindicated. The political price paid by the conventional theorists and politicians will one day be the same ridicule heaped on the Austrians – but even more so.

Well, you clearly don’t seem to get financial balances. In any accounting
period, total income in an economy must equal total outlays, and total
saving out of income flows must equal total investment expenditures on tangible
assets. The financial balance of any sector in the economy is simply income
minus outlays, or its equivalent, saving minus investment. A sector may
net save or run a financial surplus by spending less than it earns, or it may
net deficit spend as it runs a financing deficit by earning less than it
spends.

Furthermore, a net saving sector can cover its own outlays and accumulate
financial liabilities issued by other sectors, while a deficit spending
sector requires external financing to complete its spending plans. At the end
of any accounting period, the sum of the sectoral financial balances must
net to zero. Sectors in the economy that are net issuing new financial
liabilities are matched by sectors willingly owning new financial assets. In
macro, fortunately, it all has to add up. This is not only true of the income
and expenditure sides of the equation, but also the financing side, which
is rarely well integrated into macro analysis.

You can next divide the economy into three major sectors: the domestic
private sector (including households and businesses), the government sector,
and the foreign sector and ask a simple question relevant to current
developments. What happens if the domestic private sector tries to net save, with
no attending change in the government or foreign sector financial balances?

If households attempt to net save by spending less than they are earning,
and businesses attempt to net save (reinvesting less than their retained
earnings), then nominal incomes and real output will be likely to fall. Money
incomes and economic activity will tend to contract until private savings
preferences are reduced (with essential goods and services taking up a
larger share of household income as incomes fall), or until depreciation leaves
businesses and households inclined to invest once again in durable assets.
Common sense suggests that a drop in private income flows while private
debt loads are high is an invitation to debt defaults and widespread
insolvencies – that is, unless creditors are generously willing to renegotiate
existing debt contracts en masse.

In other words, such a configuration is an invitation to Irving Fisher’s
cumulative debt deflation spiral which has been discussed before. Markets
at a certain point to not “self-correct” as you assume, but they go way past
that equilibrium point and you can get a debt deflation debt spiratl. So
unless some other sector is willing to reduce its net saving (as with the
foreign sector recently, via a reduction in the US current account deficit as
US imports have fallen faster than US exports) or increase its deficit
spending (as with the federal budget balance of late) then the mere attempt by
the domestic private sector to net save out of income flows, given the
existing private debt overhang, can prove very disruptive. The public sector
releveraging facilitates the restoration of private savings. It’s a basic
accounting identity. It’s something those of the Austrian school seem to
view as some kind of a nefarious Keynesian plot, but it’s double entry
bookkeeping, which has been around for 7 centuries or more.

Now, if you tell me that the fiscal resources have hitherto been deployed
in a highly inefficient manner (bailing out zombie banks, for example), I
would agree with you. I’m not advocating that. I’ve advocated Job Guarantee
programs (Government as Employer of Last Resort) in effect using labor,
rather than, say, gold, as a fully deployed buffer stock. What’s wrong with
that? You don’t want free lunches. Nor do I. I want to reduce
unemployment. The government spending you decry is going to come via the automatic
stabilizers (unless you want to get rid of those as well), so why not deploy
it in a more productive way so that you have “shovel ready” labor, ready
to go back in the private sector if and when output in the private sector
improves. Trying to engineer a reduction in the deficit via austerity
programs at a time when private spending is still insufficient to maintain
adequate GDP growth is a recipe for disaster. IT WILL INCREASE THE DEFICIT, which
is presumably precisely one of the “imbalances” you want to mitigate.

For once, households were doing the rational thing. Yes, the unintended
macro consequences were severe – but that’s the point. The system was
balancing itself. It was correcting itself form an era of extreme credit
growth a severe one at that – one that exceeded productive growth. It *needed*
rebalancing.

Yet what is the solution you propose? To fight this correction by
continuing the system of illusory wealth creation via excess credit – credit above
and beyond was is productively needed. As if *this time* the government
will address the malinvestments of the past and finally get it right. It
never does.

I’m not saying we step back and let the entire system collapse in a
deflationary death spiral. I would rather we use increased gov’t debt to slow
down the collapse – to manage it to a realistic level.

To fight this correction, as you suggest, will ultimately destroy the
currency. Nothing personal – but I find the Keynesian and Monetarist theories
to be arrogant in thinking they can coax and manipulate the economy as they
see fit. In the short term, they succeed… but after several such doses
of “economic stimulus,” the debt, if you haven’t noticed, never really gets
repaid. It grows. The beast gets bigger and hungrier each time you
witchdoctors of ecomomics feed it. It will turn on us all and destroy the
currency.

Gold is patiently waiting in the wings. It has endured manipulation and
ridicule for decades. Its time will come.

John Exter, von Mises, and others will be vindicated. The political price
paid by the conventional theorists and politicians will one day be the
same ridicule heaped on the Austrians – but even more so.

This isn’t like borrowing 20 bucks from your room mate to pay the rent until your next paycheck, because there is no next paycheck for America. We don’t create very much economic value in this country anymore. Fiscal stimulus and artificially low interest rates can only temporarily mask the problems, but more importantly, will greatly exacerbate them in the future.

I look forward to this debate. Thanks for having the intellectual integrity to have it.

To balance things, let’s look at the other side too. Libertarians prefer limited government; fair enough. But private interests do not necessarily coincide with the overall public good, to say the least. So it’s not as if the other extreme isn’t problematical, as our bloated and out-of-control financial sector demonstrates all too clearly. I fear corporate monstrosity at least as much as government monstrosity; in other words, corporate control of the governmental function, which, after all, is fascism, is certainly detrimental to the libertarian position, which in a certain sense is “agrarian,” and even “pre-industrial.” I see industrialism as the big factor of disequilibrium; there exist economies of scale, and therefore centers of great power. Super big business is at least as problemtatical as big government, and they tend to coalesce in the industrial world. An out-of-control private sector is no more inherently positive in relation to the public good than is non-accountable monstrous government. It is possible to “buy” government, and in fact that is exactly what seems to have occured in the US.

My objection to libertarians is that they are hyperindividualists on the one hand, and ignore realities of time on the other. Regarding the first, no human being can survive as an individual without community. From this point of view, the main ill of modern industriialized and urbanized society is precisely this loss of community among human beings.

Regarding the second, libertarians seem to live in a kind of time warp. This isn’t 1776. This is no longer a small agrarian society living in neighborly small towns–and even then we had ‘robber barons’; Predatory humans with insatiable greed for power and money we always will have. We now live in immense urban agglomertions which make democratic institutions impossible and basically provide the substance for every kind of demagoguery and media maniplation. The problem in the US currently, isn’t with “government.” It is with a nascent fascism, if this is defined, as Mussolini did, as the joining of corporate and government power. Thus the problem lies in the fact that big finance and big business have taken the reins of power and bought the government to pursue their ends without regard to the public weal, but only those of profit. It is Wall St. and crony capitalism that has just hijacked the government and is responsible–for instance–for the irresponsible bailouts of the big banks bad casino bets and for the obscene bonuses that their CEO’s get, for predatory institutions such as the IMF, for governtment subsidies of corporate agribusiness, and so on and on. Government is peopled with a revolving door of finance-corporate interests. It is evident, and it is as if few people draw the obvious conclusions. One would like to see a little sober realism and courage among writers, rather than an endless, garroulous stream of lucubrations larded with political mythology and ideological sentimentalisms and just plan wishful thinking.

The general run of Americans, who are basically, brainwashed by corporate media, don’t get it. They believe in “free markets” and “democracy.” The degree of illusion as regards the concrete reality of what these entail today is so pathetic it borders on senility. And their so-called intelligentsia helps them not one whit, although thankfully there is a minority–albeit exceedingly small–that provides light on the situation from various points of view and in accordance with various disciplines. The people are brainwashed into thinking the problem is “government” pure and simple, and that salvation lies in private initiative. This allows the real culprits to do what they want. People don’t stop and ask what exactly is private initiative and “free markets” in the context of immense private multinational corporations, some with resources greater than entire countries, and capable of buying all the votes they need to do what they please in our “lobbocracy-plutocracy”. We have the best “democracy” money can buy. Certain intellectuals piously declare that the “average man’s” grasp of things musn’t be underestimated. This is the sort of sentimental clap trap that covers a multitude of betrayals. That the US has become a veritable tower of babel doesn’t seem to cross their minds. They speak as if wisdom at one with reality underlies the society. This is nonsense. The US population understands their everyday reality within severe limits and largely sees through the lenses of what they are told by the media, not to speak of a host of biases and mythologies. The myth of the wise average man is just another instance of the demagoguery that is rife in this society, and that passes for sagely wisdom.